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How Technology Is Making the U.S. More Energy Independent

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Technological advances in energy exploration, production, and management are reducing the United States’ dependence on foreign oil by boosting domestic production of oil and gas and leading to more efficient energy use.

In 2005, the U.S. Energy Department issued a report warning of an imminent, “abrupt,” and dangerous peaking of world oil supplies. In the U.S., 60 percent of the country’s net petroleum was imported at the time.

Three years later, in July 2008, the U.S. was seeing firsthand the effect of its unquenchable thirst for oil and the supply problems that the Energy Department had predicted. Oil prices reached record highs, trading at $145 a barrel, and gasoline prices closed in on a once inconceivable $5 per gallon in many states. The issue of U.S. energy consumption was at the center of national dialogue.

Today, oil is trading at about $84 per barrel, approximately 40 percent less than its 2008 high. The U.S. has increased domestic oil and gas production by 12 percent since 2008, petroleum imports have fallen to 46 percent, and the U.S. is now the largest producer of natural gas in the world.

Technological advances in exploration, production, and energy management are allowing the U.S. to boost domestic production and reduce energy consumption. The combination of increased national production and more efficient energy use is leading the U.S. to become less reliant on foreign oil.

Energy Consumption and Management

Consumers and businesses are trying to decrease their energy use. Deloitte’s “reSources 2012” study found that 83 percent of consumers took steps to reduce their electric bills over the past year, up from 68 percent the previous year. Meanwhile, companies are increasingly recognizing energy management as a strategic discipline and key to competitiveness. In fact, the reSources 2012 study found that U.S. businesses are targeting an average of 24 percent reductions in energy consumption over a four-year period.

One of the challenges companies face in achieving those reductions is a lack of transparency into their energy use. But software companies are popping up to help them get a handle on such data, and venture capitalists are pouring hundreds of millions of dollars into them.

Consider EnerNoc, which develops software that helps companies manage their energy use and automatically reduce their consumption during peak periods. Using EnerNoc’s software, companies can sell electricity they don’t use back to utilities. Better managing their energy consumption also allows companies to reduce the amount of high-priced electricity they need to purchase on the spot market to meet peak demand.

Another example is FirstFuel, which analyzes a building’s electric use to produce an energy-saving plan. FirstFuel’s analytics platform performs this analysis remotely; engineers don’t ever need to visit a building.

From better management of buildings and vehicle fleets, to smarter use of technology, to tighter oversight of their entire supply chains, organizations can mobilize countless tools to transform how they use energy and other resources. The benefits of active energy and sustainability management are not only financial; sound sustainability practices also attract environmentally conscious consumers and serve to shield a company from volatile energy prices.

Exploration and Production

Just as technology is improving energy management, it is also revolutionizing exploration and production. Deep water exploration, for example, has been transformed by the ability of powerful computers to crunch seismic data 15,000 feet below the sea floor. The result has been a boom in deep water drilling. In 2000, there were just 20 deep water drilling vessels. Today, there are over 200, and deep water wells are supplying eight percent of the world’s oil. Analysts expect this figure to double by 2020.¹ While deep water drilling presents new environmental concerns, there is no doubt that it is helping the U.S. satisfy its energy needs.

Technology leaps are also taking place on land. Today, geoscientists and software engineers drill wells on computer screens before drilling in the field. They create 3D images of the earth’s underground that reveal hidden oil deposits. Offset angle drilling then allows drillers to penetrate previously inaccessible deposits, directionally guiding drill bits at angles between 45 degrees and 80 degrees into spaces between old vertical wells where crude still remains in shale reservoirs.

The combination of horizontal drilling and hydraulic fracturing technologies have only been in widespread use for about four years, but in that time they have allowed gas produced from shale formations to go from accounting for just two percent of America’s natural gas production to more than 30 percent today. The increased supply has largely contributed to a dramatic decrease in U.S. natural gas prices.

The increase in natural gas production and subsequent price decreases that horizontal drilling and hydraulic fracturing have precipitated may need to be tempered by the controversy surrounding the techniques. Critics of hydraulic fracturing in particular are concerned about the amount of water it requires and the potential for polluting the ground water system.

The examples of deep water and virtual exploration are just the beginning of the technological revolution in the industry. In Long Beach, Calif., Signal Hill Petroleum has buried 6,000 small yellow canisters containing sophisticated equipment so sensitive that it can record the vibrations generated by a person walking past them.² The devices work in tandem with a fleet of hydraulic “vibroseis” trucks. By producing vibrations, the trucks create images of oil formations as far as three miles underground.

The Possibility of U.S. Energy Independence

If, five years ago, you had asked, “Which country in which region of the world can be totally energy self-sufficient?”, no one would have guessed the U.S. Yet now, with the discovery of North America’s massive shale gas and oil reserves, combined with the technological innovations that can unlock their potential, the prospect of energy self-sufficiency for the U.S. is coming into focus.

The geopolitical consequences of U.S. energy independence are significant. For decades, the U.S. has been the world’s largest oil-consuming nation, using about a quarter of global energy supplies, despite having just five percent of the population. This fact has shaped the U.S. economy and the country’s foreign policy. Since 2008, however, domestic oil output has climbed, and production is projected to increase for years to come. Consequently, the U.S. should soon lose its ranking as the world’s top oil importer—a dubious honor that is expected to go to the European Union by 2015.³ By obtaining more of its energy through domestic resources, the U.S. will be better positioned to protect its national sovereignty and its economy.

This publication contains general information only and Deloitte LLP and its subsidiaries ("Deloitte") are not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication. Copyright 2012 Deloitte Global Services Limited.

How Technology Is Making the U.S. More Energy Independent

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